Emerging and frontier nations represent huge untapped markets. Given how quickly these economies are growing and the size of the potential consumer base, the right innovations have the potential to deliver huge returns and exponential industry growth, especially in the areas of energy, agriculture, and health. A Milken Institute GlobalConference panel of entrepreneurs and investors working in emerging and developing economies looked at specific market and investment opportunities in these countries, as well as the exciting possibilities for new technologies to improve millions of lives.
Moderator Margaret Anderson of FasterCures opened thesession by posing the question of whether it’s possible to have financial
return alongside social return (the “double bottom line”). In other words, can
capitalism improve people’s lives?
The social benefits of the initiatives represented by the
panelists were obvious. Mel Spigelman, president and CEO of the TB Alliance, shared
the alliance’s vision of being able to treat the 9.5 million new cases of
tuberculosis every year with a blister pack of drugs taken for 7-10 days,
rather than the hundreds of pills patients currently take over 6-30 months, a
regimen not really feasible outside the U.S. and Western Europe. Alan Boyce,
co-founder and director of Adecoagro, described large-scale food and renewable
energy projects his company has built in South America – which have involved
improvements to local education and health systems as well – along with what
has become the largest rice farm in Tanzania. Neil Eckert, CEO of Aggregated
Micro Power Ltd., a business that specializes in developing and investing in
small-scale alternative energy projects and technologies, envisioned a future
of energy infrastructure in smaller (1-10 megawatts), distributed, modular
solutions—or as he analogized, “desktop computers versus mainframes.”
Investment costs are lower, delivery schedules faster, and return rates
potentially much higher.
Spigelman noted that TB is a huge issue in the BRICS
countries (Brazil, Russia, India, China, and South Africa). These growing
economies would be major recipients of the benefits of new TB treatments. In
many cases, as in China, TB Alliance is helping countries build new technology
capacity that they badly want, to help create futures as technology-driven, not
only commodity-driven, economies.
The path for financing such efforts, however, is not as
clear. John Birkhold, a partner with Origin Asset Management, declared that
equity investment doesn’t have to be short-term, but that you have to ask
yourself who the right investor is – it needs to be a truly long-term, patient,
educated investor. “The equity market is the right place for much of this, but
the question is, is it private or public equity?” He raised a number of
concerns investors have about such projects, including the asset life of
technologies, their portability, and government risk (a significant concern).
Eckert described the frustration of seeking financing for
projects like his that are small in scale and early-stage; governments, regulators,
and investors often have difficulty seeing beyond the traditional model of the large-scale
power grid (and in many cases penalize innovation). He has had success getting
financing from institutions like the World Bank and USAID, but private equity
has been harder to come by. Boyce, who has been able to take a company public,
supported Birkhold’s view that patient, long-term investors are key. Local
investors, including governments, are a linchpin, as they see the tangible benefits
of the projects being undertaken.
The TB Alliance has relied heavily on philanthropy to
de-risk research and move it to proof-of-concept, but Spigelman said they are
beginning to seek other investors. There are other global health product
development partnerships that have successfully created hybrid
nonprofit/for-profit models.
Eckert noted that the technologies that he is working with
are not particularly “high-tech” – in some cases they are decidedly low-tech – but
they have transformative potential, and the logistics necessary to deliver them
are transformative. And Anderson noted that while all of the projects described
sounded long-term, in most cases they did not seem necessarily high-risk in
terms of the market opportunities.
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